MetLife To Pay $478 Million In Unpaid Policies, Penalties

MetLife will pay nearly $500 million to to settle an investigation by six states that questioned whether the company did enough to track down beneficiaries after policyholders die.

Of that amount, $40 million will be paid in penalties and about $438 million will go for unpaid policies that were written more than 50 years ago.

MetLife did not admit wrongdoing but has also agreed to strict business reforms to ensure that it pays life insurance benefits quickly, the California Department of Insurance said Monday. Insurance regulators in California, Illinois, Florida, New Hampshire, North Dakota, and Pennsylvania will use their portions of the settlement money to find and pay people who are owed millions of dollars in "death benefits" — cash for a beneficiary when a life-insurance policyholder dies.

The New York life insurer, which has major operations in Bloomfield, settled as part of a much wider investigation by several states into life insurance practices.

At issue is whether life insurers are using a federal list of Americans who die, the U.S. Social Security Administration's Death Master File, to determine prompt payment of life insurance benefits. Life insurers say that they pay billions in benefits every year and that they go to great lengths to find beneficiaries.

"For many years, MetLife selectively used the Social Security Administration's Death Master File database to cut off payments to annuity holders but did not use that database to identify deceased life insurance policyholders and pay their beneficiaries," said California Insurance Commissioner Dave Jones. "Under today's settlement, that practice will end. I hope other life insurers will follow MetLife's lead and enter into similar agreements."

MetLife said it paid about $12 billion in total life insurance claims last year, and more than 99 percent of life insurance claims are given to beneficiaries and paid "in a timely and accurate manner."

"MetLife has undertaken a variety of proactive steps over many decades to locate the small percentage of policyholders who have lost contact with the company, including using the Social Security Death Master File as part of this process to match virtually all of its administrative records in 2011," the company said in a statement.

Many states, including Connecticut, require life insurers to hand over unpaid life-insurance claims to a state account if the insurer is unable to find a beneficiary within a certain period of time. In Connecticut, if a life insurer is not able to find a beneficiary three years after a policyholder dies, any funds related to the policy must be declared unclaimed property and transferred to the state treasurer's office.

Several states, such as California, have investigated life insurers after learning that the companies had not been handing over unpaid claims.

In the MetLife agreement, the company will pay $438 million on so-called industrial policies, of which $188 million will be paid by the end of this year. The rest is expected to be paid in the next 17 years, though some portion of that could end up in state accounts for unclaimed funds. This is separate from the $40 million penalty.

MetLife's industrial policies were designed for "working-class" people and sold in the 1940s and 1950s, according to the California regulators. Some of the industrial-policy accounts have been dormant, and a California audit last year found that MetLife had not taken steps to determine if those policyholders are still alive or, if the person has died, to pay the money to a beneficiary or place the funds in states' unclaimed property programs.

The company said it made the decision to take "further steps to reconnect with many of MetLife's oldest insureds (generally over age 90), many of whom either did not have a Social Security number or did not provide the company with a date of birth at the time their policies were issued."

MetLife's settlement becomes effective when 14 additional state insurance departments sign it. Connecticut's Insurance Department is not currently part of the agreement.

The Connecticut Insurance Department will review the settlement to decide whether it will become a signatory, department spokeswoman Donna Tommelleo said. It's similar to settlement with Prudential that the Connecticut department reviewed and agreed to take part in, she said. Prudential Financial agreed to pay $17 million in a 20-state agreement finalized in February.

By not joining as a signatory, Connecticut regulators would reserve the right to investigate and seek a separate settlement.

To check for an unpaid policy, go to http://www.metlife.com/policyfinder, and type in the name of the insured person.